Tencent-backed Chinese travel firm slashes Hong Kong IPO size

November 13, 2018 17:04
Hong Kong's stock market has been rattled by trade tensions between China and the United States. The benchmark Hang Seng Index is down almost 16 percent this year. Photo: Bloomberg

Tencent Holdings-backed online Chinese travel firm Tongcheng-Elong launched a far smaller-than-expected initial public offering of up to US$233 million in Hong Kong on Tuesday, amid a weak stock market and a string of poor performances from recent listings in the city, Reuters reports.

Tongcheng-Elong, which is also backed by travel website Ctrip.Com International, is selling about 143 million shares at a price range of HK$9.75 to HK$12.65 ($1.24-$1.61), giving it a potential valuation of US$3.65 billion, according to a term sheet seen by Reuters.

The company had earlier been seeking to raise up to US$1 billion, but weak markets and a slide in Ctrip’s share price forced it to slash the size of the IPO, according to Refinitiv publication IFR.

Online parenting firm Babytree Group, backed by Chinese e-commerce giant Alibaba Group Holding, was also due to hold an IPO press conference on Tuesday but canceled it on the day.

Babytree said it had to reschedule the event due to a “technical issue”. It did not elaborate.

Hong Kong has seen a wave of Chinese tech companies seeking to go public this year, with a total of US$27.7 billion raised in the financial hub in the first three quarters of the year, an increase of around 300 percent compared to the same period in 2017, Refinitiv data shows.

But markets have been rattled by trade tensions between the United States and China, which have hit emerging markets particularly hard.

Hong Kong's benchmark Hang Seng index is down almost 16 percent this year.

The market slump has prompted many companies to put their IPO plans on hold, such as Tencent’s (0700.HK) music streaming arm which is still deciding whether to launch its US$2 billion IPO this year, according to sources close to the deal.

Tongcheng could raise as much as US$268 million if a greenshoe, or over-allotment option, is exercised within one month of the start of trading.

Books are scheduled to close on Nov. 19 and the company is expected to start trading on Nov. 26.

Tongcheng plans to use the proceeds of the IPO to enhance products and service offerings as well as to fund potential acquisitions and investments.

The company made a profit of 194 million yuan (US$27.86 million) in 2017, compared with a loss of 2.16 billion yuan in 2016, according to its prospectus.

CMB International, JPMorgan and Morgan Stanley are joint sponsors for the deal.

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